NDIS Providers : The Risk of Poor Governance
The NDIS is providing billions of dollars of taxpayer money to support people with disabilities. There is a risk that the full benefit will not go to the intended beneficiaries due to poor governance.
The NDIS Practice Standards provide a benchmark for providers of supports and services to NDIS participants.
The key outcome of standard 2 is to ensure that
• Each participant’s support is overseen by robust governance and operational management systems relevant (proportionate) to the size, and scale of the provider and the scope and complexity of supports delivered.
A real life example of the risk of poor governance was presented to me recently for an NDIS provider called Waverley Industries (aka Waverley Social Enterprises). The provider is located in Melbourne, Victoria.
According to public information (ACNC), Waverley has a revenue of $15m, of which $6m is NDIS funding. They employ 390 staff, and are considered a large charity.
Waverley appointed an Accounts Receivable Accountant to a vacant position in the Finance team. The role is responsible mainly for invoicing NDIS participants, receipting payments and reconciling the cash/bank. The AR Accountant was appointed by her husband, the current Chief Operations Officer of Waverley. The role reports to the husband (COO).
The questions that may be asked are:
1. Was there a clear documented policy to ensure there was no conflict of interest and a true and fair recruitment process was followed?
a. Noting specifically the fact that the recruitment team, who would have assessed the candidate to be better than all the other candidates, also report directly to COO.
b. The information provided to me shows there was no policy.
2. Was the significant governance risk of a married couple (or even in a relationship) in the same department with a direct reporting line considered? The risk is especially high in finance, where you only need two for collusion.
a. Noting the fact that the Accounts Receivable appointee is responsible for receipting and reconciling all payments received from customers and the husband is responsible for oversight of the process.
b. Bad governance may result in payments being diverted from the organisation with little trace.
3. Is there a policy that shows the objectivity and independence with regard to performance reviews, remuneration reviews and any future potential disciplinary action for spouses?
a. The hiring or promotion of a spouse can be financially lucrative for the individuals concerned.
4. From an Audit perspective this appointment leaves the organisation vulnerable in terms of segregation of duties and internal controls. Was this considered?
a. Any auditor would consider that if the AR role (wife) is reporting to the COO (husband), there is significant weakness in internal controls.
The confidential informant who has provided this information confirmed that several employees raised queries with the executive management team about the potential conflict of interest. They did not receive any feedback.
One even contacted the Board of Directors, and again no response was given.
Good governance, as required by the NDIS Practice Standards, suggests that the organisation not only avoid conflict of interest, but also avoid the appearance of conflict of interest.
In my opinion, Waverley Industries is a large enough organisation (390 staff) to have proper management systems, and proper segregation of duties, to ensure it meets its obligations under standard 2.
Given the significant amount of public funding that the organisation handles, there is a heightened risk of
• mismanagement of resources,
• lack of accountability,
• inability to meet its charitable purpose, and
• loss of trust in the organisation
An independent internal controls audit could help the organisation identify potential weaknesses, and give comfort to the stakeholders.
